The Ontario Superior Court of Justice recently considered and applied s. 99(2) of Ontario’s Environmental Protection Act, R.S.O. 1990, c. E.19 (“EPA”) to find liability and award damages for historical contamination caused by the spill and migration of solvents used in dry-cleaning from 1960-1974. Following the recent leading decision on s. 99 in Midwest Properties Ltd. v. Thordarson,1 Justice Roger’s decision in Huang v. Fraser Hillary’s Limited2 provides clarity to the interpretation and application of this section which provides a civil cause of action between private parties, irrespective of fault or negligence, for the spill of a pollutant.

Specifically, and significantly, in Huang, Roger J. held that the right to compensation provided for in s. 99(2) of the EPA applies to spills that occurred prior to the “Spills Bill” amendment to the EPA (which contains the statutory right of compensation) coming into force in 1985. Although Huang dismissed the plaintiff’s claims in negligence, trespass, and Rylands v. Fletcher,3 the decision signals that the statutory right to compensation contained in s. 99(2) of the EPA will continue to be interpreted broadly and provide a powerful tool for plaintiffs seeking compensation for contaminated sites.

FACTS

Eddy Huang purchased two adjacent properties in Ottawa in 1978 intending to develop them in the future. Mr. Huang’s properties neighboured Fraser Hillary’s Limited (FHL), a dry cleaning business that had been in operation since 1960. On approaching his bank to obtain a mortgage to develop the properties, the mortgage specialist required Mr. Huang to obtain a Phase I Environmental Assessment on his properties. The Phase I ESA revealed likely presence of contamination by tetrachloroethylene (“PCE” or “PERC”) and trichloroethylene (“TCE”) – chemicals found primarily in dry cleaning solvents. A subsequent Phase II ESA recommended excavating and disposing of the contaminated soil or the installation of a barrier system. Due to the contamination, Mr. Huang’s bank would not advance any funds for development or renew his existing mortgage.

Mr. Huang brought a claim for damages against FHL and David Hillary, the president and sole director of FHL and owner of an adjacent residential property, seeking significant damages for remedial and related expert expenses for the soil and groundwater contamination. Mr. Huang alleged five potential causes of action: (1) nuisance; (2) negligence; (3) liability under s. 99(2) of the EPA; (4) trespass; and (5) strict liability under the doctrine of Rylands v. Fletcher.

FHL did not dispute that its dry cleaning solvents contaminated Mr. Huang's properties between 1960 and 1974, but denied liability on a number of grounds relating to each of the causes of action advanced. Neither of the defendants called any evidence.

While the Huang decision provides an excellent analysis the various environmental pollution causes of action raised by Mr. Huang, the jurisprudential significance of Roger J.’s reasons is found in his analysis of the application of s. 99 of the EPA to spills that occurred prior to 1985.

SECTION 99(2) OF THE EPA

Section 99(2) of the EPA creates a civil cause of action which allows any person to seek compensation for losses or damages incurred as a result of, among other things, the spill of a pollutant, from the owner of the pollutant and the person having control of the pollutant. Both the “owner of the pollutant” and the “person having control of the pollutant” are defined in s. 91(1) as the owner or person having control “immediately before the first discharge of the pollutant”. A “spill” is a discharge (meaning emission, deposit, leakage, addition, or otherwise) (a) into the natural environment, (b) from or out of a structure, vehicle or other container, (c) that is abnormal in quality or quantity in light of all the circumstances of the discharge: ss. 1(1) and 91(1).

Justice Roger found that FHL’s dumping of PCE and TCE into the soil and groundwater from 1960 to 1974 constituted a spill according to the definitions in Part X of the EPA and therefore could attract liability under s. 99(2). At the time the spills were happening, however, there was no statutory right to compensation for private individuals as Part X of the EPA, which included s. 99(2), did not come into force in Ontario until 1985.

FHL argued, therefore, that it could not be held liable for spills pre-dating the coming into force of the section as legislation is presumed not to have retrospective effect. Justice Roger rejected this argument and made three important determinations with respect to the application of s. 99(2) to spills occurring prior to 1985:

Applying s. 99(2) to the circumstances of this case did not constitute a retrospective application. Rather, even where the spills occurred prior to 1985, to apply the section was prospective “as it enables such a right to compensation at this time or in the future for loss or damage incurred as a direct result of such spills.”4

The presumption against retrospective application was inapplicable given that the provision is designed to protect the public: “The purpose of the EPA is to “provide for the protection and conservation of the natural environment” and “[t]he intent of the legislator, by enacting s. 99(2), is that innocent parties be entitled to compensation directly from the polluter.”5

In the alternative, if the presumption against retroactivity applied, it was rebutted by the clear intent of the legislator. Interpreting the EPA purposively, the right to compensation provided by s. 99(2) is “a present right and not a right to prospectively adjust some earlier action or earlier compensation” and the clear intent of the legislator was to not limit compensation to discharges occurring after the coming into force of Part X of the EPA.6

In the end, Justice Roger held FHL liable under s. 99(2) of the EPA as the owner and person having control of the pollutant immediately before the first discharge and awarded Mr. Huang $1,632,500 for remediation costs and $201,726.21 for expert costs.

TAKEAWAYS

Huang presents an expansive interpretation of s. 99(2), following the lead of the Court of Appeal in Midwest. Both of these cases have signalled that the section is intended to provide “any person a new and powerful tool to seek compensation from the owner of the pollutant and the persons having control of the pollutant without any requirement of intent, fault, duty of care, or foreseeability.”7

That said, there are built in restrictions on the application of the section found in the definitions of “spill” and “owner” or “person having control” of the pollutant:

With respect to spills, the court held that the flow of pollutants from the source property onto neighbouring properties is not a “spill” as defined by the EPA because the pollutants were already in the natural environment and not discharged from or out a structure, vehicle or other container.8

With respect to being the owner or person having control of the pollutant, the court dismissed the action against FHL’s principal and neighbouring property owner David Hillary because the evidence established that Hillary, both in his capacity as sole shareholder, director and officer of FHL and in his capacity as an adjacent homeowner, was never the owner of the pollutant or the person having control of the pollutant at the time of its first discharge.

Although these determinations are largely driven by the particular facts of this case, courts will need to continue to clarify the application of and restrictions contained within s. 99(2).

Finally, a likely result of Huang will be an increase in plaintiffs seeking damages for loss or damage incurred from spills of pollutants which occurred prior to 1985. Presumably the courts will need to grapple with discoverability of such contamination, but the Court of Appeal for Ontario has started to provide guidance on the issue of discoverability of environmental contamination in the recent Crombie Property Holdings case.9

The content contained in these blogs is intended to provide information about the subject matter and is not intended as legal advice. If you would like further information or advice on any of the subjects discussed in a blog post, please contact the author.

3Justice Roger did hold the defendant liable in nuisance, as the interference with Huang’s use or enjoyment of property was both substantial – because the contamination exceeded MOECC standards, was ongoing, had the potential to further contaminate adjacent properties, and rendered Huang unable to redevelop his properties unless they were remediated – and unreasonable as — in addition to the reasons outlined above — MOECC testimony established that ongoing contamination would likely prevent Huang from obtaining a risk assessment for his properties and FHL’s response to the contamination was unreasonable since the company failed to conduct remediation work on the properties, despite repeated requests from the MOECC to do so.

Lerners LLP Toronto Office

How Can We Help You?

Name:*

Email:*

Office:*

Message:*

WARNING: PLEASE READ BEFORE SENDING ANY EMAIL

We look forward to speaking to you. However, before we can assist you, we must first ensure that we do not have a conflict of interest. Accordingly, unless you are currently a client of Lerners LLP, we ask that you do not include any confidential information in this email. Please note that by sending this email, you will not automatically become a client of Lerners LLP unless and until Lerners LLP confirms that it will agree to be retained on your matter.